ISLAMABAD - Energy experts and policy analysts have warned that if immediate measures are not taken by the federation and the provinces to sort out their policy differences on the interpretation and application of the 18th constitutional amendment vis-à-vis oil and gas exploration, the consequences could be disastrous.

“Because of the impasse , there has been a complete halt on exploration activities since 2014 and the major multinational companies in the sector have either left or are at the verge of closing their business operations in the country,” they said in the policy dialogue titled “Status of Petroleum E&P in Pakistan: A Deliberation on Future Strategy”. The roundtable was organised at Institute of Policy Studies (IPS) and was chaired by Mirza Hamid Hassan, Chairman IPS Steering Committee on Energy, Water and Climate Change, whereas Mohammad Raziuddin, CEO, Khyber Pakhtunkhwa Oil & Gas Company Limited (KPOGCL), delivered a keynote presentation on the progress of his organisation and the challenges it has been faced with.

Raziuddin, in his presentation, hoped that the initiative taken by the government of KP in the shape of KPOGCL would play its role in overcoming the challenges through positive engagements with the federation and the policy stakeholders at all levels. He said KPOGCL is making all out efforts to bring in investment to start exploration and development work in eight blocks in the province, which has an immense potential to increase its GDP from $25b to $125b by 2025 through oil and gas production.

Criticizing the proposed scheme of things by the federation in the shape of Pakistan Petroleum Exploration and Development Authority (PEPRA), after a lapse of seven years since the 18th amendment was passed, he said that it will give all oil and gas regulatory matters to the federal government and the provinces will have nothing.

He claimed that the federal government’s stance on the critical issue is still to have all upstream regulations and becoming the sole regulator, rolling back the 18th amendment. No representation is being given to provinces in PPEPRA. Its authority will be extended to the whole of Pakistan, including its territorial waters, the Federally Administered Tribal Areas (FATA), and the Provincially Administered Tribal Areas of KP and Balochistan. It shall also apply to offshore Exclusive Economic Zone of Pakistan as defined in the Territorial Waters & Maritime Zone Act of 1976.

He said that the disadvantages of the federal government’s stance are that not a single block has been offered to bidding since 2014 out of 35 pending blocks. “The leases awarded before 2012 have also expired and are not being renewed. Loss of more than Rs20b to the federal government in terms of royalties has already been incurred, whereas the KP has lost Rs5.8b in one year in the form of royalty due to lower production.”

He suggested that the proposed PPEPRA should only be authorized to regulate pricing and concession management of offshore, FATA, Azad Jammu & Kashmir, and Gilgit-Baltistan, and its chairman should be appointed on rotation basis between federation and the four provinces . The provinces should have their own regulatory authorities for concession management.

Former Federal secretary Ashfaq Mehmood was of the view that provincial governments should work in synergy with the federal government. Road-mapping for delegation of powers and determining their extents needs be done and think-tanks like IPS can play their part in this regard.

Mirza Hamid Hasan, in his concluding remarks, regarded the situation as a failure on part of both the federation and the provinces and stressed measures on war-footing to resolve the crisis.

“Pakistan used to substantially produce energy for itself in the past. There was a time when 50 per cent of energy requirements were met by our natural gas. Unfortunately, we are largely dependent on the external sources to meet our energy needs. We were importing oil and now we have also started importing gas in the shape of LNG and also a number of gas pipeline projects are underway to import gas. We have been benefiting from low oil prices for the last two years but now the prices are going up again because of the turmoil in the Arab world. Owing to the Middle East crisis and the turmoil world over the prices of oil have already risen from around USD50 per barrel to above USD60 per barrel recently and they are expected to go further up putting severe pressure on the country’s foreign exchange reserves. Overall, the situation seems bleak for Pakistan’s energy sector since indigenous resources are not being explored and utilised,” he lamented.

He was of the view that lack of understanding and conflict of interest between provincial and federal governments is the major cause of the crisis and no regulatory body was playing its role effectively, worsening the situation.